In September 2013, the SBIC Funding Corporation completed a pooling of SBA debentures in the amount of $622,505,000. The debentures have a coupon rate of 3.644%. Although the current coupon rate is still well below historical average rates for SBIC debentures, this most recent pricing reflects an increase from the March 2013 rate of 2.351%.
The pricing of the pool is a critical component to the cost of funds used by SBIC Funds. Once pooled, the interest rate on the SBA debentures becomes fixed for a 10-year period. The SBIC Fund is responsible only for a semi-annual interest payment on the SBA debentures until the SBA debentures are repaid. The SBA debentures must be repaid within 10 years. In addition, there are no prepayment penalties.
The Private Equity Practice Group at McGuireWoods is dedicated to keeping clients advised of new legislative and business developments as they occur. If you have any questions regarding these issues, please feel free to contact Mark A. Kromkowski (312.849.8170), your primary attorney at McGuireWoods, or any of the authors.